London Chefs Open Gulf Outlets as 20% VAT Squeezes Margins

James Robson, co-owner of the St James’s Market restaurant Fallow, signed a deal this week to open a branch in the Gulf. The move follows a pattern established by other high-profile London dining brands that have relocated or expanded into the Middle East in recent months.

Fallow serves 1,000 customers daily and gained a global following of 650,000 on Instagram through viral dishes such as a whole cod head in spicy butter sauce. Robson is not the only owner moving capital to the region. Scott’s of Mayfair, the two Michelin-starred Indian restaurant Gymkhana, and the Chinese venue Park Chinois have all opened locations in Dubai.

Isabel’s, a Mayfair restaurant popular with politicians, has opened in Abu Dhabi, while the Borough Market bakery Bread Ahead has also expanded into the Gulf. These openings have proceeded despite regional instability. Earlier this year, the US-Israeli war with Iran caused bombardment in Dubai and led to an exodus of expatriates.

The conflict continues to affect the local hospitality sector. Dinner by Heston has remained temporarily closed since the war began. The Michelin guide faced criticism in September for listing 16 restaurants that were no longer open, a discrepancy attributed to inspections conducted before the conflict started.

Robson, speaking from Hong Kong where he is scouting Asian markets, identified the Gulf, East Asia, and the United States as primary growth targets. He described the Gulf as a region that actively encourages business, contrasting it with the United States and noting that East Asia’s work ethic and taxation system make the United Kingdom look poor by comparison.

The central grievance among these owners is the Value Added Tax on hospitality. The UK charges 20%, a rate that is among the highest in Europe, where the average for restaurants is approximately 12%. Italy charges 10% on food sold in restaurants. Robson stated that the country has 'sleepwalked into multiple anti-growth taxations' over the last two budgets.

He expects further tax changes in the upcoming budget and highlighted the 25% corporation tax and dividend tax rates of 40% or more. Robson urged the government to bring VAT closer to European levels. Chefs are pressing Chancellor Andy Burnham to reduce the rate in next week’s budget.

Jason Atherton, a Michelin-starred chef who spends a third of his time at his Dubai restaurant, said it is easier to make a profit abroad than in London. Robson said he does not resent paying UK tax but believes the domestic risk-to-reward balance no longer justifies aggressive expansion. He is choosing to operate safely in London while focusing growth efforts overseas.

Felix Jakens, director of campaigns at Amnesty International UK, urged caution regarding labor practices in the UAE. He noted that the country has a poor record on workers' rights and that migrant workers, who comprise the majority of the population, remain tied to employers through a sponsorship system. These workers cannot form trade unions, and Jakens said UK businesses must conduct human rights due diligence to ensure fair treatment and pay for kitchen staff.